Amanda wants to buy a house owned by Larry for $20,000. Both of them reach an agreement,

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Question:

Amanda wants to buy a house owned by Larry for $20,000. Both of them reach an agreement, but Larry requires Amanda to pay $1,000 as down payment (deposit).

a. What is the purpose of down payment in this situation?

b. Assume there is no additional condition attached to the down payment. Briefly explain what will happen in relation to the down payment as provided by law, if one of them changes his/her mind against the agreement.